Square closes up nearly 5% after Jack Dorsey's company launches its own bank
- Shares of Square jumped as much as 7% Tuesday after the company officially launched its banking operations.
- Square Financial Services will offer FDIC-insured deposit accounts and loans to small businesses that have historically used the company for payment processing.
- The company had been working on launching a bank for more than four years.
Shares of Square jumped as much as 7% Tuesday after the company officially launched its banking operations this week.
The company's stock closed up 4.6%.
Square's new, wholly owned bank will offer FDIC-insured deposit accounts and loans to small businesses that have historically used the company for payment processing.
Salt Lake City-based Square Financial Services said Monday it will initially focus on offering business loan and deposit products, beginning with underwriting and originating business loans for Square Capital's existing lending product.
Before its launch, Square Capital loans were issued through a partnership with Celtic Bank.
"Bringing banking capability in-house enables us to operate more nimbly, which will serve Square and our customers as we continue the work to create financial tools that serve the underserved," Square CFO Amrita Ahuja said in a statement.
The company had been working on launching a bank for more than four years, and Square received regulatory approval last March. "We do not expect the bank to have a material impact on Square's consolidated balance sheet, total net revenue, gross profit, or Adjusted EBITDA in 2021," the company said.
While it's only on the merchant side for now, the move signals Square CEO Jack Dorsey's broader ambition of making the tech company a one-stop shop for finance. Square also has a track record of building fast-growing products internally. Cash App, which started as a smaller internal project, now makes up roughly half of Square's gross profit.
Square's move paved the way for other fintechs that may want to cut out the middleman in banking. Fintech company Sofi applied for a national bank charter last year. But the version Square went with — an industrial loan charter, or ILC — has historically run into pushback from bank lobbyists. The industry has criticized it as a way for companies to skirt rules that have historically separated banking and commerce.